Wednesday, September 23, 2015

Buying A Home Is Better Way to Produce Wealth Than Renting

According to the latest Beracha, Hardin &
Johnson Buy vs. Rent (BH&J) Index
homeownership is a better way to produce greater wealth, on average, than
renting.

The BH&J Index is a quarterly report that
attempts to answer the question:

Is it
better to rent or buy a home in today’s housing market?

The index examines that entire US housing market and
then isolates 23 major markets for comparison. The researchers at use a “’horse
race’ comparison between an individual that is buying a home and an individual
that rents a similar quality home and reinvests all monies otherwise invested
in homeownership.”

Ken Johnson, Real Estate Economist & Professor
at Florida Atlantic University, and one of the index’s authors states: "The
U.S. as a whole is still in clear buy territory. The cities of Cincinnati,
Chicago, Cleveland, and New York City are deep into buy territory."

Miami and Portland had been inching closer toward
renting being the better option but have "pulled back from the
edge." Johnson goes on to say, “that's a good sign for home
pricing as it suggests prices are going to level off in these metro
areas."

Bottom Line

Buying a home makes sense socially and financially.
Rents are predicted to increase substantially in the next year, so lock in your
housing cost with a mortgage payment now.